1. Detailed Design – Obligation, Risk and Liability 2. On some legal aspects of the concept of the Variation under the 1999 FIDIC Red Book

1. Detailed Design – Obligation, Risk and Liability
Clive Horridge
Before going further, one opportunity for
contractors under the “FIDIC Red-Book”
concept of Construction contracts, is
FIDIC's Sub-Clause 13.2 opportunity for the
Contractor to assume a design role with a
proposed design variant which offers
benefits to the Employer, where the total
value of such is shared equally between the
Contractor and the Employer by means of a
feepayabletotheContractor.
This opportunity can be very lucrative for
both Parties, especially when the
Contractor is a larger concern, and one that
is very familiar with design-build concepts,
and in particular with innovative and
specialist design skills in specific fields of
construction.
Examples here would typically be modern
bridge designs and experience in specialist
methods of construction of modern
techniques, or perhaps specialist railway
renewal techniques, to name just two. In
these fields of expertise, some of the larger
contractingcompaniesorconsortiumshave
already invested heavily in the research,
design, development and ownership of very
specialist and expensive construction
equipment and they can often offer to some
of the more traditional 'old-school'
Employers such as National Road or Rail
Authorities, more modern and innovative
construction designs which deliver
technical and economic benefits to the
EmployerundertheSub-Clause13.2concept
withintheRed-Bookframework.
FIDIC Conditions of Contract for
Construction 1999 First Edition, and its
relativelyfreshout-of-the-boxoffspring,the
1
2017 Edition for example, are contracts
which essentially aim at just that; a contract
for construction, with the Employer as the
Party providing the Design and the
Contractor as the other Party constructing
the Project to that Design, in principle
nothingmoreandnothingless.
With such a simplistic approach and an
otherwise'neutral'contractwhererisksand
liabilities of the Parties are reasonably well-
balanced,whatcouldpossiblygowrong?
Well, in our experience there's plenty of
opportunities for such Projects to “go
wrong” but the causes mainly stem from a
basicmisunderstandingbythePartiesofthe
concepts of obligations, risk and liability
apportionment within such contracts and
this article is intended to highlight one of
them, related to perceived obligation, risk
andliabilityforthedesign.
Detailed Design – Obligation,
Risk and Liability
On some legal aspects of the
concept of the Variation under
the 1999 FIDIC Red Book
Blagomir Minov
5
8
Senior Contracts Advisor
Clive Horridge
Senior Contracts Advisor
FIDIC Red-Book 2017 Edition has various differences in approach to matters of risk and liability of the Parties and
therefore the reader is cautioned to be extra vigilant if assimilating this article to the various clauses and sub-clauses
referredtoherein
1
____________
Senior Construction Lawyer
1
Issue 15, December 2018

2. 2
However, the foregoing is an aside to the main theme of this article, so let us put Sub-Clause 13.2 to one side for the moment and focus on the more
straightforwardconceptofEmployer'sDesignandtheContractor'sobligationtoconstructthatdesign,withinthegivenTimeforCompletion.
It might be useful here to present a representative flow-chart depicting some of the Parties' main obligations and risks under FIDIC Red-Book regarding
theconceptofdesign:
The above graphic shows from the left-hand side a typical three-stage Employer's Design process under the FIDIC Red-Book principle, where admittedly
the process would normally begin much earlier than shown, with feasibility studies and so forth, but these preliminary stages are not considered
particularlypertinenttothisdiscussionwithinthisarticle.
However,thethreestagesdepictedabovedoshowthatoncetheTechnicalDesignandSpecificationhavebeenestablishedbytheEmployer,theWorking
DrawingsorotherwisetheDrawingsforConstructioncanbedrawnup.Fromthesedimensioneddrawings,areasonablyaccurateBillofQuantities(BOQ)
would be established for the purposes of the Tender Procedure, in order for the Employer to establish the range of participating tenderers on an equal
basis and the selection of the winning bid in accordance with procurement procedures and applicable law regulations. Thus, on this basis, the Contractor
would then be appointed for the purposes of the Post-Contract construction process and the tendered rates and prices would be agreed upon, whereby
such in conjunction with the Employer's tender quantities within the BOQ would form the Accepted Contract Amount as stated in the Contract
Agreement.
Once the Commencement Date has been notified by the Engineer pursuant to Sub-Clause 8.1, the Contractor will be responsible for the delivery of the
construction process within the allocated Time for Completion under Sub-Clause 8.2, and this would commence with a compliant programme under Sub-
Clause 8.3. As contractors will no doubt be aware, time-related risk (unless progress of the Works is interfered with by events attributable to the
Employer) is probably the most major risk for the Contractor from the moment that the Commencement date is established. The above diagram then
shows on the right-hand side, what should be an uninterrupted construction process which takes account of the Employer's Right to Vary under Sub-
Clause13.1andtheassociatedprocedurethereofunderSub-Clause13.3.
Figure1.Parties'mainobligationsandrisks-Scenario1
Issue 15, December 2018

3. In this and other regards, the issuance of instructions to vary the Works pursuant to Sub-Clauses 3.3 and 13.1, the process of Measurement and Evaluation
pursuant to Sub-Clauses 12.1 to 12.3, and the processing and issuance of Interim Payment Certificates under Sub-Clause 14.6, all fall to the responsibility of
the Engineer (on behalf of the Employer) and the above diagram ends with the Employer's obligation to make Payment to the Contractor of the Contract
Price(CP),whichessentiallyroundsoffthemostbasicobligationsoftheParties(yetbynomeansall),underthisformofContract.
We shall now explore what has in recent years become variants to the above Employer's 'Design' process, and such variants have become fairly
widespread and commonplace worldwide in the industry, whereby under the terms of the Contract (or within documents forming the Contract) the
Employer has opted to pass the obligation of the preparation of the Working Drawings (otherwise often known as the Drawings for Construction) to the
Contractor.
Whilst this is a matter often misunderstood by both contractors and employers alike, under most Countries' jurisdictions, and particularly Civil law
Countries, the Working Drawings, although part of the design process and 'package', do not generally fall under the stricter interpretation of Design at
law, the reason being is that the Working Drawings should be in strict compliance with the Technical Design, yet be dimensioned to suit the application of
theTechnicalDesigntotheexistingcircumstancesoftheconstructionorProjectSite.
Designersaretypicallycertifiedassuchatlawandaretherebysubjecttoalonger-termofliabilityfortheirdesignsofoften30yearsormore,andsuchlegal
liability is substantial to the extent that design errors can, in certain unfortunate circumstances, lead to punitive punishment and even custodial
sentencesforindividualswhocarrysuchresponsibility.
Hence,itisoftenmandatoryfortheentitydrawinguptheWorkingDrawingsorDrawingsforConstructiontobeCertifiedasaDesignerunderthelaw,yet
the process of drawing up such drawings is not a design activity at law in itself, because it is to be conducted in strict compliance with the approved and
State verified Technical Design. Yet in this regard, such drawings will also have to be approved and verified by the Statutory Design Checker as being
strictlycompliantwiththeapprovedTechnicalDesign,theSpecificationstherein,andtheNationalStandardsinforce.
Under the circumstances whereby the Contractor has assumed the obligation to prepare the Working Drawings or Drawings for Construction, the
Contractor (or its Subcontractor on behalf of the Contractor) would be required to be State approved and certified as a Designer, and once the drawings
had been prepared, they would be submitted to the Engineer/Employer for review and further verification and approval by the Statutory Design Checker
priortotheirissuancetotheContractorasDrawingsforConstruction.
In any event, with the exception of drafting errors or anomalies, any error in such Working Drawings which stems from an error or omission within the
Employer'sTechnicalDesign,wouldbeattheliabilityoftheEmployer,andwouldrequiretheEmployer'scorrectionorcompletionoftheTechnicalDesign
in order for the Contractor to process such correction or completion through to the Working Drawings, and the subsequent chain of their submission to
the Employer to obtain the Statutory Design Checker's approval of such corrections and the subsequent issuance of the State approved Working
DrawingstotheContractorforConstruction.
As one may imagine, the foregoing procedure and its complexities will have to function efficiently in order that delays within the procedure do not cause
delay to the process of the Contractor's obligation to prepare such drawings, and more importantly, the Works through to Completion.Now comes the
questionofriskandliability,inthelikelyeventthattheforgoingpotentiallycomplexproceduremaybecome(foravarietyofreasons)aneventofdelayto
Completion.
The following diagram is a graphical representation of the scenario whereby the Employer has chosen for the Contractor to prepare the Working
DrawingsorDrawingsforConstruction:
3
Figure2.Parties'mainobligationsandrisks-Scenario2
Issue 15, December 2018

4. Difficulties arise when the Engineer or the
Employer fail to understand or otherwise
acknowledge the limitations of the Sub-Clause
13.3 [Variation Procedure] procedure, either by
abusively attempting to pass design liability over
to the Contractor, or by the Engineer's failure to
instruct the Employer's corrections or otherwise
revisionstothedesign.
Even worse, Contractors who have exposed
themselves to such design liability (by giving
effect to such an abusive instruction) will often
face the difficult scenario that they did so by
“acceptance by conduct” at law, even though
such exposure would have stemmed from the
Contractor undertaking activities that go
beyond the scope of its responsibilities under
theContract.
Hence,weconcludewithawarning-Contractors
beware - and resist being drawn into design
liability. If in any doubt whether or not such an
Engineer's instruction is abusive, or whether or
not the Contractor is obliged by the contract to
be responsible for such design corrections, seek
advice from qualified professional consultant
experts in the field, raise a dispute if necessary,
and proceed with the dispute resolution
proceduresunderClause20oftheContract.
Theriskispotentiallyhighinthealternative.
an abusive instruction (or request for proposal)
the Contractor would expose itself to assuming
liability for that part of the design, under the
Contractandatlaw.
However, on the condition as expressly stated in
the last paragraph of Sub-Clause 13.1 that the
Contractor cannot make any changes to the
Permanent Works unless and until instructed by
the Engineer to do so, the Contractor cannot
proceed to correct the Employer's Technical
Design until instructed to modify the Permanent
Works to a changed or corrected design,
whereby such changes to the Technical Design
would form an integral part of the instruction,
and thus be the basis of the Contractor's
preparation of revised Working Drawings,
accordingly.
SuchapositionoftheContractorissupportedby
the third paragraph of Sub-Clause 4.1
[Contractor's General obligations], which
unambiguously states that the Contractor “(ii)
shall not otherwise be responsible for the design
or specification of the Permanent Works.” Hence
the Design of the Permanent Works remains the
responsibility of the Employer, which includes
any necessary amendments, corrections,
accommodation of current Specifications or
supplement designs for missing design
componentsthereof.
Such an instruction would prima facie be in
breach of the Contract, because design and/or
remedy of errors in the design would rightly be
considered beyond the Contractor's scope of
the Works and liability. By complying with such
Immediately, it can be seen from the above
graphic that by the Employer moving its Step 2
(preparation of the Working Drawings) from the
Employer's pre-Tender Design activities into the
Contractor's Post-Contract activities, any
interference caused by errors, deficiencies or
anomalies in the Employer's Technical Design
willpotentiallycauseadelaytotheactivityofthe
Working Drawing preparation and approval
processontheprogramme,andthuswouldhave
a high propensity as a cause of delay to
Completion, which would be attributable to the
Employer (i.e. as a consequence of the fault or
failureof,orwithin,theEmployer'sDesign).
It would (in such circumstances) also cause
additional activity for the Engineer under Sub-
Clause 12.1, namely the Engineer's responsibility
to re-measure the Works (additional in the sense
of the effects of such changes, corrections or
additions to the Works necessary as a
consequence of errors or omissions in the
Employer'sTechnicalDesign).
Noneoftheaboveareparticularlyproblematicin
terms of contractual procedure, because FIDIC
Red-Book deals very comprehensively with the
process of identification and notification of
errors in the Employer's Design by means of Sub-
Clause 1.8 and Delayed Instructions or Drawings
asprovidedforbySub-Clause1.9.
However, in this respect, the Employer has
exposed itself to the Risk and Liability of
corrections or additions to the Works necessary
as a consequence of errors or omissions in the
Employer's Technical Design which may cause
delay to Completion and the potential for
Contractor's claims for extension of time and
moneyassociatedtherewith.
In recent times it is our experience that
Employers have realized their vulnerability in
such circumstances and as a consequence, it has
become more frequent in practice that the
Engineer will issue instruction to the Contractor
to carry out and propose the rectification of
errors in the Employer's Design, under the guise
of requesting a proposal under Sub-Clauses 13.1
and13.3.
4
Issue 15, December 2018

5. On some legal aspects of the concept of the
Variation under the 1999 FIDIC Red Book
Blagomir Minov
Senior Construction Lawyer
6. The definition of “Variation”, albeit
scarce, is provided under Sub-Clause 1.1.6.9
oftheConditions,whereby:
“ 'Variation' means any change to the Works
which is instructed or approved as a variation
underClause13[VariationsandAdjustments]”
7. The above definition reveals one of the
quintessential characteristics of a Variation –
it always represents a change to the Works,
instructed within the scope limitations under
Sub-Clause 13.1. It follows therefore that
throughthemechanismofaVariation:
I. No change to the terms and conditions
ofthecontractcouldbeeffectuated,butonly
achangetotheWorks,and
ii. Only such changes to the Works that
c o u l d b e s u b s u m e d u n d e r t h e
subparagraphs of Sub-Clause 13.1 woud be
permitted.
8. Consequently, the principle conclusion
could be inferred that in order to be
contractually valid and legally binding, any
change to the Works (apart from those
enlisted under Sub-Clause 13.1), or to the
terms and conditions of the contract in
general, should be expressly agreed
between the Employer and the Contractor in
the form of a supplementary agreement (or
addendum) thereof. Hence, the scope of the
envisaged changes (changes in the Works
under Sub-Clause 13.1 by means of Variations,
as opposed to any other changes to the
Works or to the contract conditions by
means of a contract addendum) outlines the
first key distinction between a Variation and
an addendum (or amendment) to the
Contract.
9. The second difference, deduced from
the perspective of contract law, is that a
Variation (be it instructed or otherwise
approved under Sub-Clause 13.3) is by its
legal nature a unilateral statement of will,
performed by the Engineer on behalf of the
Employer, whilst an amendment to the
contract in the form of an addendum would
always be predicated by the coordinated will
of both the Employer and the Contractor,
withoutanyinvolvementoftheEngineer.
I. INTRODUCTION
1. Although it would not be imprecise to
confer that contemporary legal systems, be
they part of the common law circle or the civil
law family, have far advanced in articulating a
relatively broad arsenal of contractual tools
to deal with changes occurring in the course
of execution of a contractual agreement, one
could nevertheless admit that the 1999 FIDIC
suite of construction contracts has its fair
share of contributions to the spectrum of
possible contractual approaches to such
situations.
2. Moretothepoint,theconceptofchanges
to the Works under a construction contract,
instructed by way of a variation instruction
from the Employer or the Engineer, in
the latter's capacity of the contract
administrator, has become an integral part of
the 1999 FIDIC “rainbow” of General
Conditions, through the continous
implemenation of the concept of the
Variation.
3. Theanalysis,whichfollowshereinbelow,
aims to briefly outline some specific aspects
of the contractual nature of a Variation, as
provided for under Sub-Clauses 13.1 [Right to
Vary] and 13.3 [Variation Procedure] of the
FIDIC 1999 edition of the Conditions of
Contract for Construction for Building and
EngineeringworksdesignedbytheEmployer,
alsoknownasthe“RedBook”.
II. THE CONCEPT OF A VARIATION AS
OPPOSED TO THE MECHANISM OF A
CONTRACTADDENDUM
4. Sub-Clause 13.1 [Right to Vary] of the
General Conditions of Contract (hereinafter
referred to as the “GCC”) provides the
Engineer with the right to initiate, at any time
prior to the issue of the Taking-Over
Certificate of the Works, a Variation either by
an instruction or by a request for the
Contractortosubmitaproposal.
5. In accordance with Sub-Clause 13.1,
Variations may accordingly include, in their
scope:
(a) changestoquantities;
(b) changes to the quality or other
characteristicsofanyworkitem;
(c) changes to levels, positions or
dimensionsofanypartoftheWorks;
(d) omission of any work unless it is to be
carriedoutbyothers;
(e) any additional work, Plant, Materials or
services necessary for the permanent Works
includingtests;or
(f) changestothesequenceortimingofthe
executionoftheWorks.
5
Issue 15, December 2018

6. in 2015 before the Court of Appeal of England
1
and Wales (Civil Division) . The case concerned
an appeal by the Spanish civil engineering
contractor Obrascon Huarte Lain SA
(hereinafter referred to as “OHL”), which was
engaged for the design and construction of a
new road access around the Gibraltar Airport,
against a decision ruled by the Technology and
Construction Court at the Queen's Bench
DivisionoftheHighCourtofJustice.
14. OHL appealed against parts of the
judgment of the first instance, arguing among
others, that the judge had erroneously found
that certain documents issued by the Engineer
didnotconstitutevariationinstructions.
15. The background to the case is that
followingthesigningoftheagreementin2008
between OHL and the the Government of
Gibraltar for the design and construction of
theGibraltarAirportandFrontierAccessRoad,
in the course of execution of the project, the
Employer provided OHL with a draft
document entitled “Guidelines for the
assessment on the use of non-hazardous fill for
land reclamation and general backfilling
purposes within Gibraltar”. This document,
which was referred by the contracting parties
as the “draft fill guidelines”, required OHL to
assess soil contamination by reference to
criteria, which had been stricter than the
relevant soil target values, that had previously
beenincorporatedintothecontract.
16. Against OHL's contention that the draft
fill guidelines constituted variation
instructions within the meaning of Clause 13.1
of the GCC, the Court of Appeal held that as far
asfactsareconcerned,theEngineerhadnever
required OHL to remove from site
contaminated material by specifically
referring to the thresholds as established
under the subject draft fill guidelines. It was
found that OHL were initially stockpiling the
excavated materials on site, and as from a
given period all excavated material (whether
contaminated or not) had been removed
pursuanttothetermsoftherelevantstockpile
agreement. However, even after this
agreement came to an end, the Contractor
was not required to remove from landfill sites
any material by reference to the draft fill
guidelines.
III. THE“ACT-UPON-IT”CRITERION
12. Asoftenisthecasewithcourtpractice,
case law has helped legal practitioners on a
number of occasions, to get a better insight
into some of the more ambiguous
normative provisions or polysemous
contractual clauses, through detailing and
articulating where necessary, additional
criteria in order to help convey the correct
interpretation of the particular provision or
institution.
13. In recent years, the concept of a
Variation has been analysed and delineated
in the notable case of Obrascon Huarte Lain
SAvHMAttorneyGeneralforGibraltar,heard
10. The above assertion is corroborated
bytheprovisionofSub-Clause3.1[Engineer's
DutiesandAuthority],whichreads,interalia,
that:
“The Engineer shall have no authority to
amendtheContract.”
11. It is therefore concluded that any
Engineer'sinstructionsunderSub-Clause3.3
[Instructions of the Engineer], including a
Variation instruction pursuant to Sub-Clause
13.1,couldnotresultinanamendmenttothe
contractual terms and conditions, as the
latter effect could indeed only be
accomplished by means of a contract
addendum.
Sourceofreference:http://www.bailii.org/ew/cases/EWCA/Civ/2015/712.html1
____________
6
Issue 15, December 2018

7. 17. Initsconclusiveremarksonthematter,theCourtofAppealdecidedthat:
“At no time during the currency of the contract did OHL act upon the draft fill guidelines in conjunction with the CEMP so as to remove from site
contaminated material defined by reference to the draft fill guidelines. Accordingly the issue of the draft fill guidelines did not constitute a variation
instruction.”[emphasisadded]
18. The above reasoning of the court would allow one to infer that in order for an instruction to amount to a Variation, it should be clear under the
particular circumstances of the given case, that the Contractor had in reality acted upon such an instruction. Formulated in a different way, only if the
Contractor undertakes implementation of the works, which had been directed by an Engineer's instruction, could such an instruction indeed be
construedasaVariation.
19. Such a requirement could be regarded as a factual criterion for the construal of an Engineer's instruction as a Variation, which would supplement,
and should thus be taken into account together with, the elements of the aforementioned definition provided under Sub-Clause 1.1.6.9 of the
Conditions.
IV. CONCLUSIVEREMARKS
20. The contractual figure of a Variation under the traditional 1999 FIDIC suite of construction contracts is an institute, which in the dynamic reality of
the construction industry often induces effects which in the final account are similar to the results achieved by means of such traditional tools of
contractlaw,asforexample,thenovationagreementorsupplementaryagreements.
21. It is therefore crucial for the prudent construction professional to always carefully study the provisions of the contracts it operates under, and
accordingly meticulously choose the adequate contractual instrument, should a change to the initial parameters of the contract, including the works,
arise.
22. Theaforementionedconsiderationsareneitherintendedtocomprise,norshouldbeconstruedas,alegalorcontractualadvice.Theresponsibility
fortakinganydecisionoractiononthebasisoftheforegoingdeliberations,remainsexclusivelywiththeperson,havingdecidedtosoproceed.Readers
arethereforerecommendedandencouragedtoalwaysconsultanappropriatelyqualifiedlawyerregardinganyparticularlegalissueorquerythatthey
mayhave.
7
Issue 15, December 2018

8. 8
Issue 15, December 2018

9. Issue 15, December 2018
9
We hereby kindly inform you that Techno Engineering & Associates will be closed
during the winter holidays between December 21st 2018 – January 7th, 2019